Thursday, December 16, 2010

Analysts See A Slower But Steady Property Growth In 2011

KUALA LUMPUR, Dec 16 — Analysts said today property prices next year in the Klang Valley will continue to grow but not at this year’s skyrocketing rate.

With property prices going up by more than 30 per cent in the past two years, they said many Malaysians were wondering if they should sell their properties, buy more, or just sit and wait.

Eric Ooi, the organising chairman for the 4th Malaysian Property Summit 2011, told reporters here today that the Association of Valuers, Property Managers, Estate Agents and Property Consultants (PEPS) would be bringing in experts to address the real estate concerns, especially of homebuyers and investors.

“On the local front, the economy has bounced back and the stock exchange has reached new highs, showing signs that the stimulus packages introduced after the global financial crisis have worked themselves into the system,” he said.

He added that while landed residential prices in the Klang Valley skyrocketed, especially in prime locations, other sectors are showing mixed results.

Retail is “fairly strong” but the office sector is still soft but improving, as is the industrial sector, Ooi said.

“While real estate prices compared to 25 years ago might have increased ten times, we must not forget that 25 years ago, interest rates were also very high... to a certain extent, that has cushioned its effect but not enough, I know it’s not enough,” he said, acknowledging that home prices are beyond the affordability of an average home buyer.

He said an average property, either landed or condominiums, will be about RM450,000 in the Klang Valley.

James Wong, the immediate past president of PEPS, said the country’s economy will continue to expand next year, but was also quick to add that it will be at a slower pace.

He said he expects to see a double dip recession in the U.S. and more European countries to be debt-ridden.

“So the property market in 2011 will still grow but probably it will grow at a moderate rate. So unlike the fears of the economists in China and in Singapore, you will not expect a property bubble for our country in the foreseeable future. This is because the sharp increase in property prices are only in landed residential properties, in very choice locations and there is actually a very big penned up demand for such properties, both in the Klang Valley and Penang and also in certain upmarket condominium project launching,” he said.

“There is liquidity in the market, although Bank Negara is trying to curb speculation, which is a good thing,” Ooi acknowledged.

The central bank’s imposition of a maximum loan-to-value ratio (LVR) of 70 per cent for a third and subsequent housing financing facility taken by a borrower, was seen as a timely pre-emptive measure to avert unhealthy speculative activities and a potential property bubble.

With the latest measure that has already taken effect, people buying their third and subsequent house would be required to pay a higher down-payment than the current standard minimum of 10 per cent of the value of a house.

The analysts pointed out that although they predict a steady growth, there are still a number of challenges to be aware of, that could take a negative spin on the property market.

One of them is the highly speculated snap polls expected next year.

“I think if you look at investors, in general, investors wants stability. So, whichever the government is, stability is very important. So long as, I think you don’t have the situation of hung parliament for example, then if you have a government and the government takes affirmative action... then it will have not much impact on the real estate market,” Ooi said.

There is also the question of whether there will be an increase of interest rates.

“I think over the past year, there had been increases introduced by Bank Negara but I think it is unlikely that there will be major increases in 2011 because any major increase in interest rates will affect repayments and will affect affordability. So, I don’t expect interest rates to increase substantially,” he said.

Wong admitted that a large number of property prices in the Klang Valley are beyond the means of most young professionals as well as those who are preparing to start a family.

“One way of overcoming it is for the government to open up lands for developers who wants to build affordable housing and probably provide incentives for developers who wish to do so,” he suggested.

Choy Yue Kwong, PEPS president, insisted that investing in properties is one of the “safest” way to invest.

“Everybody knows property is the hedge against inflation. It’s the safest one, when you buy a property, if you can hold, it will go up. The only problem is when people over leverage,” he said.

The 4th Malaysian Property Summit 2011 will be held on January 18 at the Sime Darby Convention Centre and speakers will be presenting their property market outlook for the year.